Abbott Laboratories to pay $1.6 billion over misbranding drug

Story highlights

Civil settlements with states and the federal government total $800 million

It includes a criminal fine of $700 million

The company maintained a specialized sales force to tout off-label uses

Abbott Laboratories has pleaded guilty and agreed to pay $1.6 billion to resolve its criminal and civil liability arising from the company's unlawful promotion of the prescription drug Depakote, the U.S. Justice Department said Monday.

Acting Associate Attorney General Tony West said it was case of Abbott putting "profits ahead of patients."

The total includes a criminal fine of $700 million and civil settlements with the states and federal government totaling $800 million. Abbott pleaded guilty to a criminal misdemeanor for misbranding Depakote.

Separate from the DOJ settlement, Abbott agreed to pay 45 states a total of $100 million to resolve liability under the state consumer-protection laws.

That makes this the second-largest fraud settlement involving a drug company, behind only the $2.3 billion Pfizer settlement in 2010. It is the third-largest fraud settlement against the government in any field.

Abbott pleaded guilty to misbranding Depakote by promoting the drug to control agitation and aggression in patients with elderly dementia and to treat schizophrenia when neither use was approved by the Food and Drug Administration, the Justice Department said.

Abbott will be subject to court-supervised probation and reporting obligations for Abbott's CEO and board of directors.

Justice Department officials said they were unable to link the illegal prescriptions to any deaths.

"This is an elder abuse case," U.S. Attorney Timothy Heaphy of the Western District of Virginia told reporters.

Top Justice Department officials led by Deputy Attorney General James Cole were joined by Virginia state officials who began the investigation after they were approached by whistle-blowers.

Officials said the federal government will receive about $560 million from the civil settlement. The total expected to be divided among all 50 states is about $240 million. The whistle-blowers will receive a total of $84 million.

Heaphy said Abbott earned about $13 billion from Depakote sales during the period investigated, but he said it was difficult to determine how much of that was the result of sales for illegal purposes. He expressed confidence that, once the fines are factored in, Abbott will not have profited from the improper practices.

"We are pleased to resolve this matter and are confident we have the programs in place to satisfy the requirements of this settlement," said Laura Schumacher, executive vice president and general counsel for Abbott, in a statement issued from the company's offices in Abbott Park, Illinois. "The company takes its responsibility to patients and health care providers seriously and has established robust compliance programs to ensure its marketing programs meet the needs of health care providers and legal requirements."

Under the law, a drug maker's promotional activities must be limited to uses approved by the FDA. Promotion by the manufacturer for "off-label" uses renders a product misbranded.

In this case, Abbott pleaded guilty to misbranding Depakote by promoting the drug for off-label uses.

The company admitted that from 1998 through 2006, it "maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use," the Justice Department said in a news release.

"In addition, from 2001 through 2006, the company marketed Depakote in combination with atypical antipsychotic drugs to treat schizophrenia, even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use."

The FDA approved Depakote only for epileptic seizures, bipolar mania and the prevention of migraines.

In 1999, Abbott discontinued a trial of Depakote in the treatment of dementia due to adverse events that included drowsiness, dehydration and anorexia.

Abbott trained its sales force to promote the drug to health care providers and employees of nursing homes as better than antipsychotic drugs for controlling agitation and aggression in elderly dementia patients, the release said.

Abbott sales representatives touted the fact that Depakote was not subject to certain provisions of the Omnibus Budget Reconciliation Act of 1987 and its regulations intended to prevent medications from being used unnecessarily in nursing homes, it added.

"Exploiting the fact that certain OBRA provisions did not yet apply to Depakote, Abbott sales representatives stated that by using Depakote, nursing homes could avoid the administrative burdens and costs of complying with OBRA," the news release said.

The company wound up giving millions of dollars in rebates to pharmacists at long-term-care facilities that were based on increases in the use of the drug in nursing homes they serviced, the news release said.

"In addition to using its sales force to promote the drug to health care providers and employees of nursing homes, Abbott created programs and materials to train the pharmacy providers' consultant pharmacists about the off-label use of Depakote to encourage them to recommend the drug for this unapproved use," it added.

"Not only did Abbott engage in off-label promotion, but it targeted elderly dementia patients and downplayed the risks apparent from its own clinical studies," said West, the acting associate attorney general. "As this criminal and civil resolution demonstrates, those who put profits ahead of patients will pay a hefty price."

The company also admitted that, from 2001 through 2006, it marketed the drug to treat schizophrenia. Though the company paid for two studies of the use of Depakote to treat schizophrenia, neither met the goals established for the study, it said.

"When the second study failed to show a statistically significant treatment difference between antipsychotic drugs used in combination with Depakote and antipsychotic drugs alone, Abbott waited nearly two years to notify its own sales force about the study results and another two years to publish those results," it said. During that time, the company continued to promote the drug for the treatment of schizophrenia.

Despite this incident, Abbott will continue to be able to sell its drugs through government programs, a Justice Department spokeswoman said.

Such off-label marketing is not unusual among drug companies, said David Antonuccio, an emeritus professor of psychiatry and behavioral sciences at the University of Nevada School of Medicine. "To a lot of companies, the risks of punishment for off-label marketing are part of the cost of doing business," he said. "I think it's an open question about whether that fine will have the deterrent effect that it's hoped to have."

Antonuccio noted that drugs are not approved for certain indications because evidence does not exist to satisfy the FDA that they are safe and effective for those purposes. "For the drug companies to promote these practices means they're promoting practices that don't have scientific support for safety and efficacy. That's a problem. It exposes people to unknown risk."

Abbott plans to separate into two publicly traded companies by the end of the year.